Switzerland: Liquidity Aid for UBS and Credit Suisse “Not a Bailout”

Swiss Finance Minister Karin Keller-Sutter said the government's decision to provide liquidity support to UBS Group AG and Credit Suisse was made with the aim of maintaining financial stability and not simply a desire to save a troubled institution.

She highlighted the high cost of a possible Credit Suisse bankruptcy to the Swiss economy and noted that a potential bankruptcy would pose a contagion risk to other banks, both at home and abroad.

The minister's comments came after the Swiss National Bank announced it was providing "significant liquidity support" to support UBS Group AG's acquisition of Credit Suisse.

UBS has acquired Credit Suisse for 3.0 billion francs ($3.23 billion), representatives of the two Swiss banks said on Sunday. The Swiss central bank opens a credit line of 100 billion francs. The federal government has guaranteed an additional 9 billion francs to UBS in case the Swiss central bank incurs losses from the deal.

UBS will pay about 0.76 Swiss francs per share in the form of 3 billion francs worth of treasury stock, compared with an offer of 0.25 francs per share earlier on Sunday worth about $1 billion, which was rejected from the board of Credit Suisse. However, UBS's latest offer remains well below Credit Suisse's closing price of 1.86 francs on Friday.

As part of the deal, the Swiss central bank agreed to offer a 100 billion franc liquidity line backed by a federal default guarantee to UBS, the Swiss finance ministry said. The government is also providing guarantees against losses of up to 9 billion francs, but only after UBS assumes the first 5 billion francs of losses on certain portfolios of Credit Suisse assets.

The deal will create one of the largest banks in Europe. UBS has total...